If large organizations wish to participate in the head-to-head race for innovation or digital transformation, they will need to learn how to implement agile portfolio management properly.
Why Traditional Portfolio Management No Longer Suffices
Imagine that, in a world that is fast today and even faster tomorrow, you are the CEO of a 5,000 FTE organization, with 200 product teams under your wing. And imagine you are at ease, because you know at any moment in time your teams do the right things, and they do them right.
Alas, this is wishful thinking! Entrepreneurial competition has picked up and customer expectations have sky-rocketed. This ever-changing world requires business ideas to be validated more quickly, more initiatives to be run in parallel and in a more effective and coordinated fashion.
Many CEOs are grappling with this complex reality. Lack of transparency, increasing overhead costs and a thorough disconnect between a company’s strategy and its operations have made it painfully clear that traditional project portfolio management no longer suffices.
Create a committed organization with increased transparency in the use of resources and better links to your company's strategy
Create a committed organization with increased transparency in the use of resources and better links to your company's strategy. Consider implementing agile portfolio management, as it allows you to:
- Build a committed and effective organization around value streams - and agile teams;
- Select the right initiatives, based on a rolling forecast;
- Create and maintain meaningful oversight, based on transparency of work items and resources;
- Continuously steer on value and metrics in smaller increments...
…at any time, rather than twice a year.
But alas again! While around 80 percent of organizations surveyed by CA Technologies say they’re using agile methods in some form in all of the principal business functions, only 60 percent achieve their strategic potential. What's more, a mere 25 percent of organizations use agile portfolio management, whereas almost 50 percent of businesses never or rarely use such an agile approach to portfolio management. They might consider changing their minds when learning that agile companies on average report a 60 percent higher revenue and profit growth. It’s like putting a Ferrari in a garage without using it…
What is going on? Why is portfolio management in such a stalemate today? Why is it either inefficiently initiated and controlled in a top-down fashion, or ineffectively connected to the strategy of the organization, even when it is based on effective and autonomous agile teams?
And, to further the sports car analogy, how can we use our agile engine to its full potential and successfully participate in the Formula 1 of portfolio management?
The Creation of Value Streams
Before we dive into that question, let’s quickly recap what agile portfolio management entails: it focuses on the creation of value streams where stable teams are formed for a longer period of time. These teams have a clearly specified mission and an end-to-end responsibility for a product or service, enabling the assessment of the value that is created, instead of looking at specific results.
To illustrate this, imagine a team running a project on the improvement of a website’s search box. Once completed, the result is passed on to a team testing and implementing the renewed functionality. Any changes will be made by the first team, resulting in a complex web of information transfer and project planning. The teams’ focus is on the product instead of the functionality of the product.
Conversely, agile portfolio management charges a team with the bigger task of ‘increasing the number of bookings through the website’. This team would work on the improvement, testing and implementation of the search box, as well as the presentation to the client and the process of subsequent feedback. Thus, an agile portfolio management approach is successful by not only making the team responsible for the software development task, but for the full life cycle of the software in the spirit of ‘you build it, you own it’. Focused on value creation, almost like a small startup. Such a ‘product vs. function’ orientation of teams is better suited for the creation of new products and services.
High-performing teams are the engine of agility
High-performing, stable teams are the engine of agility, fueled by Formula 1 agile methods that enable management to experience the following benefits:
1. Better Alignment to the Company’s Goals and Client’s Needs
As strategic management decides on value streams, projects will be more on par with company’s goals. The CEO in our example is effectively laying out the Formula 1 tracks.
Commitment from the higher management will provide them with a better overview and this will prove beneficial to the organization as a whole: results achieved in one team may be transferred to another, improving the output of multiple teams with a single investment. For instance, the software that improved the aforementioned search box could be offered to another client as well.
Furthermore, as we will see shortly, agile portfolio management applies more frequent feedback loops, increasing a team’s understanding of the client’s wishes. Our Ferrari engines are warmed up to accelerate, making quick adjustments to market changes.
2. Better Internal Collaboration across Departments by Connecting Business and IT in Dedicated Teams
A second benefit is achieved in terms of collaboration and team orientation. As people are working closely together over longer periods of time, they are more likely to establish a shared vision and a collective understanding of the project’s (and organizational) strategies. Routinized interaction will improve collaboration, both within project teams and across departments.
Also, team members will have time to build expertise. Specific knowledge about the client won’t be lost when a team is dissolved upon completion of the project.
Finally, due to their self-managing and rather autonomous character, agile teams take over many of the traditional project management tasks. For example, they coordinate and plan their own work, pulling tasks from backlogs co-defined and prioritized by the management. Rather than spending a lot of time on coordination of individual team members, management steps up into a leadership role, guiding the vision of the products and developing an effective, enabled and motivated workforce.
In other words, management provides the pit stop maintenance, allowing the race drivers to go full throttle towards the finish line.
3. Better Planning and Use of Resources
Another benefit has to do with the planning and use of resources. Stable, full-stack agile teams are the engine of agility by owning the product, rather than a hidden part of the software development process. As the teams and their performance remain stable, their output remains stable as well, allowing for better predictability and planning. Delays in one project won’t create allocation problems in another. It is so much easier to accelerate when the number of curves on the track are limited!
4. More Transparency Creating a Shared Vision Throughout the Organization
Finally, agile portfolio management creates a culture of transparency and trust, supported by senior leadership and embodied in cadence- and tool-driven reporting. Continuously delivered products and services are considered the best measure of success. Cadence-driven reporting, thus the demonstration and steering on intermediate results in short cycles allows for better coaching and supervision. Software tooling like JIRA or CA Agile Central allow for automated reporting at any time. All parties involved know where they stand.
How to Get Started with Agile Portfolio Management?
As we have seen, in large organizations, stable teams that create value streams are a lot easier to manage than temporary teams working on small projects. Alignment to strategic goals and increased responsiveness to client demand can be achieved.
Now, let’s get back to our initial question: how can we use our agile engine to win the Formula 1 of portfolio management?
The overall answer would be for higher management to lay out the tracks, allowing the Ferrari teams to do what they do best. However, we see that in many cases, companies apply the agile methods without putting the organization in place, first. Therefore, we advise the CEO in our example to take the following steps:
- First of all, large strategic initiatives are identified in so-called Portfolio Epics, slicing strategic objectives into smaller increments that are easier to implement and to prioritize. Division into smaller, trackable items allows for a transparent connection of strategy to day to day operations. Teams understand how their work contributes to the bigger picture, and business owners understand what individual teams work on over time.
- Furthermore, the portfolio needs to be transparently prioritized towards value creation, based on quantitative (numbers) and qualitative (data) scoring models, and corresponding metrics. For example, a quantitative aspect of a scoring model would be the size of investment. Qualitative aspects would include business value, and risk. As for metrics, quantitative ones focus on progress or the team’s velocity. Qualitative metrics look into team or client satisfaction and strategic benefits.
- A third step entails the identification of the value streams of agile teams and continuous steering on value in the smaller increments. This is where the before-mentioned feedback loops come into play: in these regular review meetings project progress is demonstrated to the client, feedback is given and subsequently, readjustments are made.
- A fourth step enables direct funding of these value streams while maintaining oversight on Epics, using automated online tooling and cadence-driven reporting. The time saved by applying these tools will allow our CEO to create a clear map of the value that is being created
- As a fifth step, the portfolio needs to be connected to the innovation labs, for fast detection of business opportunities. The portfolio needs to explicitly fund for innovation using separate initiatives and slack in teams, creating room for innovation and new business ideas.
Finally, new business can be created through continuous positive feedback from customers, innovation labs, and workforce.
In the end, taking these steps will lead to a culture of transparency, increased customer orientation, continuous delivery of value and better alignment of strategy and operations. In other words, our CEO can sit back and relax, because he knows at any moment in time he is doing the right things, right. See how our agile Ferrari engine speeds across the portfolio management Formula 1 tracks?
We realize that we have only offered a bird’s eye view of agile methods. There is always more to learn about the reporting practices, artifacts and metrics.
Find out What Agile Portfolio Management Can Do for You
We hope our analogy to Ferrari engines and Formula 1 circuits has shown you the importance of agile portfolio management in organizations. Look into the opportunities it offers. Many organizations are lagging behind, holding on to methods that are inefficient, to say the least. And while agile is being applied by many, only a handful of organizations are using it in a beneficial fashion. The rewards are manifold: from increased collaboration and transparency to better planning and efficient use of resources. Not to mention the revenue growth seen at agile companies.
Thus, the time has come to get on the right track and prepare yourself for the long-term future of portfolio management. Would you like to experience its power first-hand, in a playful setting? Then participate in our Agile Portfolio Management Game. In a mere 45 minutes, you will learn about the core methodologies and start defining your organization’s Portfolio Scoring Model. Don't wait until the competition overtakes you. Get your engine started and begin your agile journey now.